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In March 2020, the Families First Coronavirus Response Act (FFCRA) was signed into law to help companies offer paid sick leave and unemployment benefits caused by COVID-19. Initially the FFCRA focused on employers with W-2 employees to help them weather the economic impact caused by the pandemic.
In December 2020 Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act which expanded the FFCRA to cover not only employers, but the self-employed. Thanks to the FFCRA expansion self-employed individuals, freelancers, independent contractors, and gig workers are now eligible for tax credits that pay you back for the time you would’ve normally spent earning money that was lost because of COVID.
Unlike the Paycheck Protection Program (PPP), the FFCRA is not a loan but a retroactive tax credit of your 2020 or 2021 income taxes and will either reduce the current amount you owe the IRS or be sent directly to you in the form of a check or ACH deposit, depending on your tax status. Any FFCRA credits sent directly to you can be spent however you need and never need to be paid back.
Dentify as a Self-employed individual. A few examples, but not limited to, include:
Have filed a Schedule SE of IRS Tax form 1040 in 2020 and/or 2021 with a positive net income and paid self-employment tax on your earnings.
Have missed work due to Covid-related issues
Note: reasons with * only apply if you’re seeking credit for dates between April 1, 2021 – September 30, 2021.
How do I know if I’m considered to be self-employed in 2020 or 2021?
The Families First Coronavirus Response Act (FFCRA) was passed in 2020 and was one of the earliest pieces of legislation designed to help small business owners afford the sick leave their employees had to take because of COVID-19.
The FFCRA originally focused only on employees of certain small businesses but had been expanded in 2021 to cover US citizens who were self-employed during the COVID-19 pandemic and suffered losses in business due to lockdowns or illnesses for themselves or family members.
The dates you can claim under FFCRA income tax credit are between April 1, 2020 – March 31, 2021 and up to 10 days for dates between April 1, 2021 – September 30, 2021.
Here is a breakdown of the days:
Childcare related time off – up to 110 days
Yourself or loved one (other than child) – up to 20 days
To qualify for FFCRA credits you must have missed work because of COVID-related issues. If you were unable to work because of one of these reasons, you may be eligible:
Self-employed individuals are eligible for FFCRA credit if they are out of work (or telework) due to government quarantine orders, self-quarantine, COVID-19 symptoms and seeking medical diagnosis. The credit is calculated by multiplying the number of days on leave and taking whichever amount is smaller:
If you are unable to work (or telework) to take care of a family member who is under quarantine or to take care of a child whose child care is unavailable, you are still eligible for this credit. The credit is calculated by multiplying the number of days on leave and taking whichever amount is smaller:
We will use line 6 of the Schedule SE on your personal tax return to determine your annual pay, that is then divided by 260 (Considered the standard amount of working days in a year) to calculate your daily rate.
From there, we must determine which reason the leave was taken and that will decide what rate can be paid for the dates being claimed. For self leave, we claim your full daily rate up to $511/day. Family or childcare leave is calculated as 2/3rds of your pay up to $200/day.
It can take up to three weeks for the IRS to acknowledge the acceptance of your FFCRA credit application and up to 20 weeks from that acceptance to receive your refund via check or direct deposit. Ask us about fast financing options.
The total FFCRA Tax credit can be up to $32,200.00 and is based on your net earnings in 2020 and in 2021.
You will have to calculate your daily average of self-employment income. This is your net earnings for the taxable year divided by 260 (the standard recognized amount of working days in a year). This allows the IRS to estimate how much you lost in wages for every day you were not able to work.
A self-employed person in the United States, as defined by the Internal Revenue Service (IRS), is generally considered someone to who the following applies:
The IRS defines a dependent as either a qualifying child or relative of the taxpayer. The relative can be your child, stepchild, foster child, sibling, parent, grandparent, grandchild, aunt, uncle, niece, nephew, or certain in-law relationships.
The Child Tax Credit helps families with qualifying children get a tax break. To have received a Child Tax credit or a credit for other dependents, you would have had to submit a Schedule 8821.
A child must have lived with you for more than half of the tax year. Temporary absences, such as for education or medical care, are generally counted as periods of living with you. You must have provided more than half of the relative’s total support during the tax year. The relative’s gross income must be below a certain threshold determined annually by the IRS (subject to change). It’s important to note that these are just general guidelines, and there may be additional rules and exceptions. The IRS provides detailed information in publications such as IRS Publication 501.
Examples of a Dependent:
No. You cannot claim double benefits on days you already received payments from unemployment insurance claims.
If your standard work day includes a weekend day, or your child was in school or daycare during a weekend, then you may include them.
If you normally don’t work on weekends or your child does not go to school on weekends, you cannot claim credits for weekends that they would not have worked or taken leave anyway. The credits are only available for the days that you would have worked or taken leave if not for the COVID-19-related reasons.
Yes! This is what the FFCRA was designed to cover, especially since a lot of entrepreneurs fall into this category.
No. you can only use days you took care of your dependent.
Yes. If the physical location where your child received instruction or care is now closed, the school or place of care is “closed” for purposes of paid sick leave and expanded family and medical leave. This is true even if your child is still expected or required to complete assignments.
Refunds for 2020 and 2021 will be sent to you directly by the IRS via check to the address provided on your FFCRA application.
We’re sorry but Adesso360 is unable to help W2 employees with filing for the FFCRA. You may still qualify for credit depending on if your employer filed for the FFCRA on your behalf. Consult a CPA for your specific situation.
The Child Tax Credit helps families with qualifying children get a tax break. To have received a Child Tax credit or a credit for other dependents, you would have had to submit a Schedule 8821.
Yes, but parents can not claim the same dates twice.
Form 1040 is the individual income tax return that everyone who generates income is required to file.
In order to file for the tax credits allowed by FFCRA, we will need to amend the customers previously filed Form 1040.
Form 1040-X is used to amend your already filed tax return. For example, you would file a 1040-X to claim FFCRA tax credits that you did not claim even though you were entitled to them.
Schedule SE is a tax form that is used to calculate the self-employment tax owed by individuals who work for themselves.
Although all businesses may qualify for the FFCRA tax credits, Adesso360 is only able ot help self-employed individuals at this time. In order for a self-employed individual to qualify for the FFCRA tax credit, they must have self-employment income that is generally on line 6 of the Schedule SE
Schedule C is a tax form used by single-owner businesses to report income and expenses related to their business on their Form 1040. Generally sole proprietors use this form to report their business earnings or losses on their Form 1040. Net income (line 31) from the Schedule C is used to calculate self-employment income on line 2 of Schedule SE (Form 1040).
This does not appear in the application. However, it is important to know that Schedule C feeds into the overall calculation of self-employment income on Schedule SE (Form 1040)
Schedule 7202 is a tax form used to claim the refundable tax credit for qualified sick and family leave wages paid by certain employers due to the COVID-19 pandemic.
This is the form that is used to calculate the amount of the credit that the business qualifies for
IRS Form 8821 allows Adesso to pull the required tax information needed to accurately calculate your FFCRA credit and helps us complete the tax documents we need to file for your FFCRA tax credits.
According to what YOU entered as income and some other factors taken into consideration, it appears you could qualify for a total tax refund in the amount of:
REFUND DISCLAIMER: Please note that this federal tax refund estimate is not guaranteed and is for informational purposes only. There are many factors that go into calculating any federal refund from the IRS such as: 1. If you owe any back taxes; 2. If you’ve already claimed a full or partial tax credit for this program; 3. A full review of your tax return for accuracy; 4. The estimate is for informational use only and is reliant on the accuracy of the information submitted.